MEMORANDUM BY STEVE FORBES

July 2, 1997

TO: MEMBERS OF CONGRESS AND CONSERVATIVE LEADERS

FROM: STEVE FORBES, HONORARY CHAIRMAN

SUBJECT: EXPANDING THE IRS AS WE KNOW IT

"A credit of up to $1,500 a year for the first two years
of college, starting in 1998. Students could receive a 100 percent
credit for the first $1,000 in tuition and book expenses, and
then a 50 percent credit for up to another $1,000. Eligibility
would be phased out for families with incomes starting at $80,000.
The credit could be taken for expenses after accounting for federal
tuition grants. After 2002, the credit would increase to a maximum
of $2,000. The plan also includes a credit of up to $1,000 a
year for the third and fourth years of undergraduate expenses,
plus graduate school and courses taken by working people. The
credit would increase to $2,000 after 2000." Excerpt from,
"A Brief Look At How The President Proposes To Reduce Taxes,"
New York Times, July 1, 1997

Huh?

So much for last year's debate over tax reform and tax simplification.
Bill Clinton and the Republican Congress have joined hands to
expand the IRS as we know it!

No normal American taxpayer understands the details emerging
from the tax bill debate in Washington. That's because the tax
code is not about to become simple, honest and fair. It's becoming
more complex, more confusing, and more corrupt. The true real
winners will be tax lawyers, lobbyists and loophole advocates.

The Clinton-Gore proposal -- to be expected -- is pure liberal
social engineering. The White House message to the American people:
Big Brother Clinton knows best. If your family does exactly what
he wants you to do, when he wants you to do it, where he wants
you to do it, then you might get a pathetically small little break
on your federal taxes. Sure, you may actually end up spending
more money on professional tax advice to figure out if you even
qualify, but apparently that's the price of doing business with
the IRS in the 1990s.

It is unconscionable for the Republicans to go along. Will
they ever learn?

Speaker Newt Gingrich and Senate Majority Leader Trent Lott
say fundamental tax reform is the GOP's top priority. But even
their tax bills will make a 7.5 million word tax code worse than
ever. Congressional Republicans are moving in the direct opposite
direction of tax reform, even as the Russian Duma abolishes 47
different types of taxes and reduces the number of tax rates on
personal income in Russia from 5 to 2 (a 30 percent rate and a
12 percent rate).

No wonder American voters shrug off GOP rhetoric as so much
Beltway hot air.

Take the House Ways and Means Committee tax bill, for example.
Just the official description of the tax cuts not the entire legislation,
mind you, just a laymen's language overview runs 215 pages. The
description of the "tax simplification provisions" of
the bill run 78 pages. The "technical correction provisions"
run 31 pages. That's 324 pages, not exactly a plan that moves
us toward abolishing the Internal Revenue Service.

Of course, if the resulting tax cuts were wide, deep and permanent,
an argument for a bigger, more confusing tax code might have some
merit. But Clinton and Congress are arguing like children over
miserly tax cuts of just $17 billion a year out of total projected
annual federal government spending of more than $1.7 trillion.

An AHGO analysis of new Commerce Department data finds that
for the last six months Bill Clinton has been taking more money
from the American people in federal taxes than any other president
in American history, a record 21 percent of GDP. Even during the
worst years of World War II, Washington never taxed Americans
this heavily. The average American family today pays more in federal,
state and local taxes than for food, clothing, transportation
and housing combined!

But the marriage penalty isn't being abolished. Senior citizens
who want to work will still get hit with big Social Security penalties.
Miserly family tax relief will be "phased in." Estate
taxes won t be indexed for inflation. So not only will Americans
continue to be taxed for dying, they'll also pay punishingly high
tax rates on the inflated value of their family assets.

Meanwhile, Bill Clinton proposes to cut the top capital gains
rate from 28 percent to 27.72 percent. Message to the future Bill
Gates and Andy Groves of the world: Get lost!

Tax relief and tax simplification may be out in Washington,
but big government spending is in. CATO economist Steve Moore
points out that a federal budget of $1.7 trillion is more money,
even after adjusting for inflation, that the federal government
spent from the Revolutionary War through 1940. The budget deal
will increase federal spending by $267 billion over five years,
increase the deficit while Bill Clinton remains in office, explode
the national debt, and not eliminate a single, wasteful government
program or department. Not the Commerce Department, the National
Endowment for the Arts or even the international popcorn promotion
program.

It is time to end not expand the IRS as we know it, downsize
Washington, and dramatically reduce the tax burden on the American
people. Two incomes in a family still can't do the job one income
did in previous generations. That's Washington s fault. And Bill
Clinton and the GOP Congress are failing to do anything about
it.